Recertification, New Assignment or Neither

[Mark Ziegler]

A little strange and I've never seen it, so a little help would be appreciated.

Received a request to do an appraisal for what's stated to be a purchase. In analyzing the contract, it's stated to be an "all cash" transaction with no financing data or contingency. I have seen a few over the past few years on especially higher value properties, which this is, where prior to closing the buyer is advised and consents to borrowing at a low rate (2% or less) as opposed to "tying up" their cash. In all of those instances, the sale closed with financing, with the exception of this one.

Effective date is 02/03/2021 and report date of 02/15/2021. I did disclose the contract information regarding the all cash sale. As I was wrapping up the report and rehashing data, I noticed that on 02/14/2021 the status in the MLS had changed from pending to a "closed sale". I added this to my comments as well. The client (AMC) has come back today and asked me to change the assignment type from Purchase to Refinance, and hopefully without charge. If there is a fee, they'll request a Recertification of Value, although also anticipating a change in the report type.

Because of the rural nature of the subject and extremely limited sales of similar waterfront properties, I'm quite sure there's been no change in value in 30 days. However, the requested change does change the purpose and, to a degree the scope, given under that scenario there's no contract (per se) to analyze. In either instance I'd have to disclose, analyze and reconcile the offering as of the effective date. Given the effective date of the update, I suspect I'd necessarily have to disclose, analyze and reconcile the recent sale of the subject as well.

Has anyone ever encountered this or something similar. Otherwise, any thoughts on how you'd approach this request are greatly appreciated.

 

[glenn walker]

A little strange and I've never seen it, so a little help would be appreciated.

Received a request to do an appraisal for what's stated to be a purchase. In analyzing the contract, it's stated to be an "all cash" transaction with no financing data or contingency. I have seen a few over the past few years on especially higher value properties, which this is, where prior to closing the buyer is advised and consents to borrowing at a low rate (2% or less) as opposed to "tying up" their cash. In all of those instances, the sale closed with financing, with the exception of this one.

Effective date is 02/03/2021 and report date of 02/15/2021. I did disclose the contract information regarding the all cash sale. As I was wrapping up the report and rehashing data, I noticed that on 02/14/2021 the status in the MLS had changed from pending to a "closed sale". I added this to my comments as well. The client (AMC) has come back today and asked me to change the assignment type from Purchase to Refinance, and hopefully without charge. If there is a fee, they'll request a Recertification of Value, although also anticipating a change in the report type.

Because of the rural nature of the subject and extremely limited sales of similar waterfront properties, I'm quite sure there's been no change in value in 30 days. However, the requested change does change the purpose and, to a degree the scope, given under that scenario there's no contract (per se) to analyze. In either instance I'd have to disclose, analyze and reconcile the offering as of the effective date. Given the effective date of the update, I suspect I'd necessarily have to disclose, analyze and reconcile the recent sale of the subject as well.

Has anyone ever encountered this or something similar. Otherwise, any thoughts on how you'd approach this request are greatly appreciated.

So it was initially an-all cash sale and you had appraised it as a purchase ? Now right after the close the new owner i placing a loan on it ? In my opinion its not a 1004-D recertification even though the value has not changed the purpose and scope of work did. Therefore I would have no problem doing a new report and would charge them about the same as a 1004-D say $150 bucks, You will also be required that you had done a prior purchase appraisal on it on such and such dates. This eliminates the 1004-D -Which could get messy if anything ever goes south . I would also at minimum drive by the property and make sure its still standing and the same as when you inspected it for the purchase a few weeks ago and ask the new owner if any changes had been made. Sometimes these goof balls will close escrow and immateriality start remodeling etc, you may drive up and its a entire different color or a new roof being installed - Ya never know. Anyways New assignment-new date - value may be the same-unless some new comps popped up and new effective date and signature. NO

 

[Ariba]

Document the change from sale to refinance in the addendum and depending on the client no charge. Based on the same effective date and nothing else changed.

 

[Mark Ziegler]

Document the change from sale to refinance in the addendum and depending on the client no charge. Based on the same effective date and nothing else changed.

Quick question to this response. How would you justify "a simple change to refinance" when, as of the effective date of the report, the borrower's didn't own the subject property?

 

[Mark Ziegler]

So it was initially an-all cash sale and you had appraised it as a purchase ? Now right after the close the new owner i placing a loan on it ? In my opinion its not a 1004-D recertification even though the value has not changed the purpose and scope of work did. Therefore I would have no problem doing a new report and would charge them about the same as a 1004-D say $150 bucks, You will also be required that you had done a prior purchase appraisal on it on such and such dates. This eliminates the 1004-D -Which could get messy if anything ever goes south . I would also at minimum drive by the property and make sure its still standing and the same as when you inspected it for the purchase a few weeks ago and ask the new owner if any changes had been made. Sometimes these goof balls will close escrow and immateriality start remodeling etc, you may drive up and its a entire different color or a new roof being installed - Ya never know. Anyways New assignment-new date - value may be the same-unless some new comps popped up and new effective date and signature. NO

Not exactly. Well before the purchase the order was placed as an assignment by a lender for a purchase related to financing. The contract stated "all cash". Nothing new per se, but the borrower actually closed all cash before the report was delivered, yet subsequent to the effective date of the report for a SOW that included a purchase. Since they closed, the lender just wants their assignment type swapped to "Refinance". New assignment in my mind, since a refinance would require an effective date after the recent purchase date (ownership). If they intend to sell this in the secondary market, I personally wouldn't accept this assignment without an interior inspection. If it's portfolio, I'd consider a 2055 with extraordinary assumptions relative to the recent inspection. Thanks for your response!

 

[Ariba]

Document the change from sale to refinance in the addendum and depending on the client no charge. Based on the same effective date and nothing else changed.

It appears there would be too many changes. For example, you stated: "Received a request to do an appraisal for what's stated to be a purchase. In analyzing the contract, it's stated to be an "all cash" transaction with no financing data or contingency.' Now it appears there is a lender involved. New assignment with a discounted fee.

 

[Mark Ziegler]

It appears there would be too many changes. For example, you stated: "Received a request to do an appraisal for what's stated to be a purchase. In analyzing the contract, it's stated to be an "all cash" transaction with no financing data or contingency.' Now it appears there is a lender involved. New assignment with a discounted fee.

I apologize, as I may not have been clear from the start. The initial assignment was from a lender/client for purposes of establishing a value for mortgage lending purposes. The contract revealed (or stated) this to be an all cash transaction. As I did state, I've seen these type buyer's go to a lender prior to closing for mortgage purposes. However, I've never seen any actually close all cash prior to closing with the intended financing. That's why the client wants to change the report to "Refinance" as opposed to "Purchase" with no fee. It's clearly a new assignment based upon the effective date given the borrower didn't own the property as of the effective date of the original report. I appreciate your response(s).

 

[RSW]

What form did you use for the original appraisal report? I hope it was a General Purpose form & not a 1004 URAR.

 

[Mark Ziegler]

What form did you use for the original appraisal report? I hope it was a General Purpose form & not a 1004 URAR.

The original request was for a bona-fide lender requesting a 1004 UAD-compliant report. No need for a GP. This may or may not suggest it was for portfolio purposes. However, I've seen numerous portfolio lender's request the 1004 UAD for underwriting purposes.

 

[Sadie]

Cannot change from Purchase to Refinance without it being a new assignment. The purpose of the appraisal is a pretty big deal. You can however, do a new appraisal for the sale client with the same effective date with the purpose being for a refinance, as long as the client is clear in the engagement letter. If they said Oops made a mistake want a refinance appraisal instead of a purchase appraisal, still treat it as a whole new assignment and clearly document your workfile, etc. Don't want to end up in appraiser jail because of the client's over sight.